116968: The difference between muraabahah and riba-based loans

There is a man who is looking for financing. He has a company that has ten million in its account, and I found a second man who says, “I will give him financing ten times the amount in the company’s account, and he can pay it back over ten years, with an annual profit of 4%,” and he describes it as muraabahah. I am an intermediary or agent. I put the first man in touch with the other, and I took my commission. Is this work of mine permissible?

Published Date: 2014-03-27

Praise be to Allah.

Permissible muraabahah is where the financer (the one who has
the money) buys something for one hundred million – as in the question –
then when he has acquired it and taken possession of it, he sells it to your
friend for payment in instalments over ten years, with a profit of 4%, for
example; then your friend can keep the product or sell it in the marketplace
for cash at a lower price, in order to obtain the cash.

This is muraabahah which is valid according to Islam. For
more information, please see the answer to question no.
36408.

But if the financer gives this money (one hundred million) to
your friend on the basis that he will take it back from him in instalments,
with an increase of 4%, then this is a riba-based loan, which is haraam,
whether it is called financing or muraabahah. In fact calling it by this
name is a kind of confusing and misleading trickery, which is also haraam.

The scholars are unanimously agreed that riba-based loans are
haraam.

Ibn Qudaamah (may Allah have mercy on him) said: Any loan in
which it is stipulated that more (than the original amount) be paid back is
haraam, and there is no difference of scholarly opinion concerning that. Ibn
al-Mundhir said: They are unanimously agreed that if the lender stipulates
that the borrower must pay back more or give a gift, and he gives the loan
on that basis, if he takes anything additional to that, it is riba. It was
narrated from Ubayy ibn Ka‘b, Ibn ‘Abbaas and Ibn Mas‘ood that they forbade
loans that bring benefits. End quote from al-Mughni, 6/436

What appears to be the case from your question is that this
transaction is not of the first type. You did not mention any product that
the financer bought then sold to your friend.

If the transaction is a riba-based loan, then your
involvement in it is haraam, and what you must do is two things:

1.
repent to
Allah, may He be exalted, and do not do that again; and do not go ahead with
any transaction before you find out the Islamic ruling on it

2.
get rid of the
money that you still have, because it came from haraam work; as for that
which you spent before you found out that it is haraam, you do not have to
do anything about it.